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Both the European Central Bank and the Bank of England will vote on monetary policy on Thursday.

The Monetary Policy Committee decision is out at noon local time (11.00 GMT). According to a Reuters poll, most expect the Bank to hold rates and maintain the stock of asset purchases at £200bn. However, a significant minority predict more QE, with most of these believing that £50bn is the amount that the MPC is most likely to plump for.

Though those expecting more QE in October are in the minority, the bulk of analysts do believe the Bank will expand its asset purchases at some point in the near future, with November considered the most likely option. The Bank also publishes the minutes of its FPC meeting on Monday at 09.30 local time (08.30 GMT), which may shed some light on the rather ambiguous statement that came out this week. Read more

Yesterday’s Financial Policy Committee statement well illustrated the bind officials find themselves in. On the one hand, they are calling on banks to build up their capital and liquidity buffers. On the other, they are desperate for them to prop up their ailing economies by lending to businesses and households.

The launch of ‘Operation Twist’ last week has overshadowed a more modest kind of innovation by the Fed: it has become one of the first central banks to move into the iPad era with the launch of two separate apps for Apple’s tablet computer.

‘The Fed’, an app created by the Chicago Fed, is basically a tablet interface for the websites of all twelve regional banks and the Fed board in Washington. It pulls feeds of news and speeches from each website and presents them in the app.

The first of two recommendations calls on banks to “take any opportunity they had to strengthen their levels of capital and liquidity so as to increase their capacity to absorb flexibly any future shocks, without constraining lending to the wider economy”. The second warns that “some actions taken to raise capital or liquidity ratios could potentially worsen the feedback loop between the financial sector and the wider economy, and so should be avoided”.

At first glance, the recommendations appear contradictory. They are not. But they are conflicting. Read more

Though the research points to three reasonable predictors of crises, none are perfect. The degree to which they are flawed offers some indication of just how tricky setting policy for financial stability will be. Read more

The European Central Bank favours the eurozone using as flexibly as possible its €440bn bail-out fund, the European Financial Stability Facility. But does that include giving the EFSF access to its liquidity?

The idea of making the EFSF an ECB “counterparty” – able to take part in its regular offers of unlimited liquidity – was proposed originally by Daniel Gros and Thomas Mayer in a Centre for European Policy Studies research paper. It gained ground last week as European leaders came under pressure in Washington from the rest of the world to come up with a more decisive response to the escalating eurozone debt crisis. With access to ECB liquidity, the EFSF’s firepower would be enormous. Read more

Although it seems like a world away, the main economic policy argument in the early summer of 2010 was about the effectiveness of fiscal stimulus, in the wake of the Obama administration’s $787bn American Recovery and Reinvestment Act.

Now that the administration is asking for a new $447bn stimulus that question should be back at the top of the agenda – and thanks to two excellent new NBER papers it is going to be a lot harder for people to distort the economic argument.

Most of the new evidence suggests that in today’s specific circumstances – where the zero lower limit means that monetary policy is not as loose as the Fed would like – then fiscal stimulus could be very effective indeed. Read more

The Bank of Israel – one of the first to raise rates following Lehman Brothers’ failure – on Monday became the latest to override domestic price pressures and cut on the back of concern over the global outlook.

The need for a second round of quantitative easing, which now appears likely, highlights the Bank of England’s misplaced faith in the stimulative power of a falling pound.

Ben Broadbent, an external member of the Monetary Policy Committee, this morning blamed the “sclerotic” banking industry for the failure of the pound’s depreciation to deliver the impact Threadneedle Street was hoping for.

If Mr Broadbent is right, then the economy’s woes are more serious than previously thought, which makes the case for further QE all the more compelling. Read more

Klaas Knot, the Dutch central banker, has said what eurozone policymakers must be thinking – but dare not say: Greece might have to default. He was not suggesting the country would or should go bankrupt, he reassured Het Financieele Dagblad, the Dutch newspaper. “All efforts are aimed at preventing this, but I am less certain in excluding a bankruptcy that I was a few months ago.”

His comments may not go down well in Frankfurt. The official ECB ”working assumption” is that Greece sticks to its bail-out programme and speculating about other scenarios is seen as unhelpful. But Mr Knot, 44, a newcomer to the ECB’s governing council, is gaining a reputation as a conservative, or “hawk” – and ally of Jens Weidmann, the German Bundesbank’s similarly-youthful president. Both are thought to have opposed the ECB’s bond buying programme.

When the Federal Reserve began its second round of quantitative easing, it was roundly criticised by emerging markets for the impact it would have on their economies.

Those officials’ concerns have now been acknowledged by some of the world’s most prominent economists. This from a pamphlet released by the Brookings Institution, Rethinking Central Banking:

The world today is more connected than ever by cross-border financial flows. The policy choices of individual countries, especially those of large, systemically significant countries, can have a substantial impact on their neighbours. When governments and central banks change their macroeconomic policy stance dramatically – as they did in the recent world financial crisis – the spillovers on other nations can be sizeable.

All of which means the major central banks must pay more attention to the global implications of their actions through the set-up of a group, which they suggest calling the International Monetary Policy Committee. Read more

This is consistent with a very bleak economic outlook and short-term rates on hold for a very long time. That is reflected in the statement with the reference to “significant downside risks”. There is a sense that the Fed has rethought the nature of the recovery and concluded that a rapid return to full employment is just not going to happen. Read more

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

Is Jens Weidmann, Germany’s Bundesbank president, rallying opponents of the European Central Bank’s government bond purchasing scheme? The Frankfurter Allgemeine Zeitung reports he hosted a secret meeting on Tuesday in the wine region that surrounds Frankfurt. Those apparently invited included Yves Mersch and Klaas Knot, his counterparts from Luxembourg and the Netherlands who are similarly conservative-minded.

Germany is awash with conspiracy theories these days about the ECB, and the idea that Mr Weidmann would want stiffen the sinews of other opponents of its bond buying – which has exceeded €70bn in the past six weeks - might appear plausible. I have heard an alternative version of the story, however. Read more

The Money Supply team

Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS

Claire Jones is the FT's Eurozone economy correspondent, based in Frankfurt. Prior to this, she was an economics reporter in London. Before joining the Financial Times, she was the editor of the Central Banking journal. Claire studied philosophy and economics at the London School of Economics. RSS

Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS

Sarah O’Connor is the FT’s economics correspondent in London. Before that, she was a Lex writer, covered the US economy from Washington and the Icelandic banking collapse from Reykjavik. Sarah studied Social and Political Sciences at Cambridge University and joined the FT in 2007. RSS

Ferdinando Giugliano is the FT's global economy news editor, based in London. Ferdinando holds a doctorate in economics from Oxford University, where he was also a lecturer, and has worked as a consultant for the Bank of Italy, the Economist Intelligence Unit and Oxera. He joined the FT in 2011 as a leader writer. RSS

Emily Cadman is an economics reporter at the FT, based in London. Prior to this, she worked as a data journalist and was head of interactive news at the Financial Times. She joined the FT in 2010, after working as a web editor at a variety of news organisations.
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Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS

Ben McLannahan covers markets and economics for the FT from Tokyo, and before that he wrote Lex notes from London and Hong Kong. He studied English at Cambridge University and joined the FT in 2007, after stints at the Economist Group and Institutional Investor. RSS